‘Dodd-Frank Fails to Meet Test of Our Times’ by Alan Greenspan

It came as quite a surprise when former Federal Reserve chairman Alan Greenspan declared in a March Financial Times article that Congress’s Dodd-Frank Act of 2010 would be a failure. The normally tight-lipped chairman doesn’t take to the editorial pages often and he had previously demonstrated support for the financial-reform law. He had even been willing to take some of the blame for the problems that precipitated the 2008 financial crisis. But apparently Greenspan had tired of being the fall guy. The law, Greenspan noted, was not suited to the complex financial system in the U.S.; he wrote that its implementation “will almost certainly” cause “a number of regulatory inconsistencies whose consequences cannot be readily anticipated.” He took issue with specific points, including its stance toward banker pay packages, which Greenspan said were necessary for banks to compete for highly-skilled executives. The New York Times’s Paul Krugman criticized Greenspan’s op-ed for its “lack of self-awareness” and called it yet another display of the former Fed chair’s disregard of a crisis “for which [Greenspan], more than any other individual, bears personal responsibility.” Others objected to the former chairman’s description of the 2008 financial meltdown as one of the “notably rare exceptions,” in which the “’invisible hand’” had failed to insure stable exchange rates, interest rates, prices and wage rates. After all, said critics, the Dodd-Frank law was created as a response to that very economic “exception.”